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Show Me the Money

Around the same time, in late May, Liddy announced he would be resigning as CEO. The experience of the past year had taken its toll. Liddy was emotionally shaken by his time at AIG. Physically, he showed his age and had put on twenty pounds. He grew inward and sullen. “There were several times I saw Ed look like he would crumble,” a former senior AIG executive who worked alongside Liddy said. Liddy felt betrayed. He had accepted the job because Paulson had asked him and he thought of it as a public service. AIG’s previous CEOs, Robert Willumstad and Martin Sullivan, had been unable to manage the risks in the FP derivative portfolio. “Ed came in after two people threw in their cards and said, ‘Fuck, I can’t play this hand,’ ” the former senior executive said. He’d worked for a dollar a year and had been stripped of the dignities afforded an executive of his station. He was tired of commuting home to Chicago every Thursday, flying coach on the 8:23 p.m. United flight out of La Guardia. One former executive recalled that Liddy sometimes turned down frequent-flier upgrades because he worried someone might spot him riding in first-class and leak it to the papers.

While AIG’s board looked for Liddy’s replacement, AIG opened negotiations with Feinberg. Pasciucco’s hopes that the deal the Treasury had come so close to approving might be stamped by Feinberg were quickly dashed. In a series of tense conference calls with Feinberg and senior AIG executives, Feinberg indicated that he was taking his own approach and had a new set of terms. In addition to regulating the compensation for the top-25 executives, setting guidelines for the next 75 highest paid, Feinberg stated he wanted to cut the 2010 retention payments drastically to less than $100 million total. Feinberg also pressed Pasciucco to get his traders to fulfill the $45 million that had been pledged in March after Cuomo’s threat to name names. “He changed the goalposts,” one executive involved in the talks says. In one conference call in July, Pasciucco confronted Feinberg about the 2010 retention payments and offered a number around $115 million. “That’s not going to fly at the White House,” Feinberg said. (Feinberg denies he has any contact with the White House. “I have never once, not once, talked to anyone at the White House about any of this,” he told me.) By the end of the summer, Pasciucco grew so frustrated with Feinberg that the two stopped speaking.

“Tim got his head chopped off
by the bonuses paid in March. He doesn’t want to go back there.”

On the morning of July 10, about 30 FP traders and executives in Wilton packed into a conference room to participate in a video conference with Feinberg. Employees in London and Paris also tuned in as Feinberg explained the reality of the situation and the forces he was managing. Feinberg was upset that news of his negotiations had leaked to the Times that morning. “I can’t believe this information was disclosed,” he said according to FP sources. AIG traders were infuriated because they believed Treasury was behind the leak. For the next 30 minutes, Feinberg explained his position. He wasn’t punishing the traders; he was trying to protect them from the fury that was out there and explained that they needed to recognize the political reality. “This is all political,” Feinberg said. When asked why he was trying to go after their preexisting contracts, he refused to answer the question.

To the traders, hearing this only confirmed their deepest, most paranoid fears. Inside FP, conspiracy theories have taken hold. Depending on who you talk to, there’s a feeling that Feinberg is a political puppet for the socialist politics of the Obama White House. “Who is truly controlling Feinberg? Our understanding is that it’s Rahm Emanuel,” one FP executive says. Another, more bizarre idea has it that Michelle Obama and Valerie Jarrett have convinced the president to redistribute wealth and make an example out of AIG. “Does Michelle Obama have a social agenda?” one FP employee asked.

The sense of us versus them exists within their own company. Many FP employees have come to distrust AIG headquarters in New York. They feel that the firm has conspired with the government to destroy FP as both a corporate and political strategy. They believe that since FP is going out of business, and the rest of AIG’s insurance assets will continue to operate or be sold to the highest bidder, it’s convenient to punish the one division of the company that caused the mess and is being dismantled. Many FP traders have retained their own lawyers, not trusting AIG to protect their interests. “We were easy targets, and we don’t even exist anymore,” one FP executive says.